U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

1 

49–112 

" ! SENATE 109TH CONGRESS

1st Session 

TREATY DOC. 

2005

109–8 

PROTOCOL AMENDING THE CONVENTION WITH 

SWEDEN ON TAXES ON INCOME 

MESSAGE 

FROM

THE PRESIDENT OF THE UNITED STATES 

TRANSMITTING

PROTOCOL AMENDING THE CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF SWEDEN FOR THE AVOIDANCE OF DOUBLE TAXATION 

AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO 

TAXES ON INCOME SIGNED AT WASHINGTON ON SEPTEMBER 

30, 2005 

NOVEMBER 10, 2005.—Protocol was read the first time, and together with 

the accompanying papers, referred to the Committee on Foreign Relations and ordered to be printed for the use of the Senate 


E:\Seals\Congress.#13
(III)

LETTER OF TRANSMITTAL 

THE WHITE HOUSE, November 10, 2005. 

To the Senate of the United States: 

I transmit herewith for the advice and consent of the Senate to 

ratification, a Protocol Amending the Convention Between the Government of the United States of America and the Government of 

Sweden for the Avoidance of Double Taxation and the Prevention 

of Fiscal Evasion with Respect to Taxes on Income signed at Washington on September 30, 2005 (the ‘‘Protocol’’). Also transmitted for 

the information of the Senate is the report of the Department of 

State with respect to the Protocol. 

The Protocol eliminates the withholding tax on certain cross-border dividend payments. The proposed Protocol is one of a few recent U.S. tax agreements to provide for the elimination of the withholding tax on dividends arising from certain direct investments. In 

addition, the Protocol also modernizes the Convention to bring it 

into closer conformity with current U.S. tax-treaty policy, including 

strengthening the treaty’s provisions preventing so-called treaty 

shopping. 

I recommend that the Senate give early and favorable consideration to this Protocol and that the Senate give its advice and consent to ratification. 

GEORGE W. BUSH. 

(V)

LETTER OF SUBMITTAL 

DEPARTMENT OF STATE, 

Washington, October 26, 2005. 

The PRESIDENT, 

The White House. 

DEAR MR. PRESIDENT: I have the honor to submit to you, with 

a view to its transmission to the Senate for advice and consent to 

ratification, a Protocol Amending the Convention between the Government of the United States of America and the Government of 

Sweden for the Avoidance of Double Taxation and the Prevention 

of Fiscal Evasion with Respect to Taxes on Income signed at Washington on September 30, 2005 (the ‘‘Protocol’’) and a related exchange of notes. 

The Protocol eliminates the withholding tax on certain cross-border dividend payments. The Protocol is one of a few recent U.S. tax 

agreements to provide for the elimination of the withholding tax on 

dividends arising from certain direct investments. In addition, the 

Protocol also modernizes the Convention to bring it into closer conformity with current U.S. tax-treaty policy, including strengthening 

the treaty’s provisions preventing so-called treaty shopping. The 

Protocol also resolves a long-standing problem regarding the taxation of local employees of the United States Embassy in Stockholm and U.S. Consulate in Gothenburg, which had resulted in reduced pensions for such employees. 

The Protocol is especially significant in light of the importance 

of economic relations between the United States and Sweden. The 

Department of the Treasury and the Department of State cooperated in the negotiation of the Protocol. It has the full approval of 

both Departments. 

Respectfully submitted. 

CONDOLEEZZA RICE. 

Enclosure: Key Provisions of the U.S.-Sweden Income Tax Protocol. 

(1) 

KEY PROVISIONS OF THE U.S.-SWEDEN INCOME TAX PROTOCOL

The Protocol to the Income Tax Convention with Sweden was negotiated to bring the current convention, concluded in 1994, into 

closer conformity with current U.S. tax treaty policy. There are, as 

with all bilateral tax conventions, some variations from these 

norms. In the Protocol, these differences reflect particular aspects 

of Swedish law and treaty policy, the interaction of U.S. and Swedish law, and U.S.-Sweden economic relations. 

The most important aspect of the Protocol relates to the taxation 

of cross-border dividend payments. Under the Protocol, most dividends paid by a subsidiary in one country to its parent in the other 

country will be exempt from withholding tax in the subsidiary’s 

home country, rather than being subject to the current treaty’s 

maximum withholding tax rate for direct dividends of five percent. 

Eliminating withholding taxes on cross-border direct dividends is 

consistent with an overall view that investment income should be 

taxed by the country of residence, not the country of source. 

The Protocol also strengthens the treaty’s provisions preventing 

so-called treaty shopping, which is the inappropriate use of a tax 

treaty by third-country residents. 

The Protocol resolves a long-standing problem regarding the taxation of local employees of the United States Embassy in Stockholm and the U.S. Consulate in Gothenburg. The U.S. Government 

had reduced the salaries paid to such individuals to take account 

of the fact that they were exempt from Swedish income tax. As a 

result, their pensions, which were based on ‘‘high-three,’’ were 

automatically reduced. Under the 1994 treaty, Sweden can and 

does tax those pensions, thereby significantly reducing the expected 

benefits to those former employees. The Protocol provides relief to 

the affected persons by providing that Sweden may not tax a pension under the U.S. Civil Service Retirement Pension Plan paid by 

the United States to employees of the United States Embassy or 

Consulate in Sweden if the individual was hired prior to 1978. 

The Protocol also updates the current treaty to reflect legislative 

changes since 1994. For example, the Protocol provides that former 

citizens or long-term residents of the United States may, for the period of ten years following the loss of such status, be taxed in accordance with the laws of the United States. 

The United States and Sweden will notify each other through the 

diplomatic channel, accompanied by an instrument of ratification, 

when their respective requirements for entry into force have been 

completed. The Protocol will enter into force on the thirtieth day 

after the later of the notifications. The Protocol will have effect, 

with respect to taxes withheld at source, on or after the first day 

of the second month following the date upon which the Protocol enters into force and with respect to other taxes, for taxable years beginning on or after the first day of January next following the date 

2 

upon which the Protocol enters into force. The Protocol shall have 

effect with respect to taxes on local employees of the United States 

Embassy in Stockholm and the U.S. Consulate in Gothenburg, on 

or after January 1, 1996, the effective date of the Convention. 

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